"We first selected Gary Bode because of his familiarity with a creative financing scheme for our new small business. During our time with Gary, his insights have helped us better structure our small businesses, save money, and learn to be better small business managers. When it comes to small business accounting, a little hand-holding goes a long way."—Justin and Joelle LeBlancGary Bode, CPA: we offer a free initial phone consult on IRS Notice CP501 or any back tax issue. Please call us at 399-2705.
IRS Notice CP501 welcomes you to their Automated Collection System. They’ve probably already sent a IRS Notice CP2000 that proposed changes to a past tax return. Next the IRS asserts you owe back taxes. Notice CP501 just reminds you of a balance due for this back tax liability. It lists the tax form, tax year, total amount demanded, interest and penalties.
“As a back tax CPA, I’ve found the original amount of the IRS demand is always higher than the figure a properly prepared tax return shows. They don’t factor in most deductions and credits.”
-Gary Bode, Wilmington NC back tax CPA
Are you Receiving Notice CP501 due to Un-filed Back Taxes?
The IRS is not in the business of preparing tax returns. But they calculate an internal “substitute” return calculate their demand on Notice CP501. The substitue return uses documents they already have, which generally relate to your income for the tax period in question. The IRS can’t factor in most deductions and credits. So the dollar demand on Notice CP501 is always high.
From Panic to Sweet: Preparing the Underlying Tax Return for Notice CP501 can render a Refund!
Preparing un-filed tax returns can render a refund. I know this sounds overly optimistic. Some folks won’t file until forced by the IRS, even if they know a refund is due.
What Happens after Notice CP501?
Dealing with Notice CP501 immediately is cheaper and less stressful. But here’s the typical sequence of events:
- You receive CP502, CP503, and finally CP504. These increase in rancor from the Reminder of CP501 to Intent to Levy on CP504. Levy means they will seize assets, like a car or bank account, garnish your wages, or snatch a potential tax refund.
- The IRS establishes a Federal Tax Lien. Here’s our post on Form 668(Y), the actual notice of the Federal Tax Lien. Liens kill your credit and frighten potential employers.
- You pay the IRS via techniques listed below, or from sale of seized assets.
- The IRS releases the lien. Here’s our post on Form 12277, Request to Withdraw Federal Tax Lien.
- Finally, our post on Form 10916c, Release of Federal Tax Lien.
Alright, I owe Back Taxes per IRS Notice CP501. What are my options?
Back tax CPAs usually request more time from the IRS. I use it to verify the amounts due. Once I finalize that amount, options include:
- Negotiating the penalties.
- Investigating an Offer in Compromise, IRS Form 656. Sometimes the IRS will accept less than the total amount due as payment in full.
- Paying the balance off in full.
- Paying the balance due through an Installment Agreement through Form 9465.
We’re a Wilmington NC CPA Firm that Prepares Back Taxes and Offers IRS Resolution Service.
Please note we have a Virtual Office to serve national and international clients. If you’ve read a few posts and like our expertise and proactive philosophy, consider calling us for a free initial consult on CP501, or any back tax issue, at (910) 399-2705.
